How Texas is writing the next chapter of America’s energy future
Utilities are partnering with communities to redefine home energy dynamics in America’s oil-production heartland
Texas is a sprawling state known for prairies and cowboys. Boasting a history of rugged individualism and a strong belief in free-market principles, it has become the energy capital of America, with an economy dominated by oil and gas but defined by an all-of-the-above mindset.
At the same time, Texas is racing into a renewable energy future, deploying towering amounts of wind and solar in recent years—all while experiencing the fastest growing demand for extra load on the grid.
These changes are challenging a state that is keen to become a leader in the economy of tomorrow, but needs to step out of its comfort zone and embrace bold ideas.
+250,000
Number of registered EVs in texas1
Climate frontlines
Texas’s next moves will be all the more important as it confronts increasingly extreme weather patterns. The fingerprints of climate change can be seen in the region’s recent heatwaves, hurricanes, snowstorms, tornadoes and torrential downpours.
Credit: CSU/CIRA & NOAA
Credit: CSU/CIRA & NOAA
Hurricane Beryl, June–July 2024
Power outages following Hurricane Beryl's landfall
In June and July 2024, Hurricane Beryl wreaked havoc on the power grid, leaving millions without electricity for days and reigniting debates about energy resilience.
Credit: NOAA
How this state’s energy system evolves in coming years could set the template for America and, indeed, the world.
Film 01
Little shifts go a long way
Balancing renewable power on the grid
Flexibility is very important for the new energy system, because electricity is a just-in-time delivery system. What we consume now is generated right now.
Chief marketing and flexibility officer, Kraken
The next frontier of energy is distributed
+35%
Increase in solar power generation year-on-year (2022-2023)2
A spurt of utility-scale wind and solar build-out is a welcome development, but Texas’s energy transition is fundamentally a story of communities. The spread of rooftop solar, electric vehicles (EVs), heat pumps, smart thermostats and more—known as distributed energy resources (DERs)—is happening household by household, block by block, neighbourhood by neighbourhood.
Consumers are feeling bullish about DERs, propelling the state to third in the nation on rooftop solar deployment and EV uptake.
These resources are important for a clean, green, reliable grid, spurring the “electrification of everything” that experts say will be necessary to usher the world into a carbon-free future.
But they also present big challenges.
A new vision for virtual power plants
Solar farms
Across the state, photovoltaic panels harness Texas's abundant sunshine, generating clean electricity for thousands of homes.
Wind farms
Home to more turbines than any other state, Texas capitalises on its vast open plains to power homes and businesses.
Battery storage
Large-scale energy storage facilities help balance grid demand and store excess renewable power for later use.
Residential solar
Rooftop panels on homes contribute to localised power generation, reducing strain on the grid during peak hours.
Distribution centres
These key hubs in the smart grid manage power flow and integrate various DERs into the electrical system.
Transmission infrastructure
High-voltage lines and substations connect remote renewable sources to population centres, enabling efficient power distribution.
Electric vehicles
With an increase in EV adoption and federal funding for charging infrastructure, Texas is promoting greater integration of transportation with the power grid.
Offshore wind
Lower wind speeds and hurricane risks in the Gulf of Mexico, economic hurdles and technical difficulties have hindered offshore development, despite the state's extensive coastline.
30%
Of Texas’s electricity is from renewable sources3
Distibuted energy resources (DER’s)
DERs change how electricity flows throughout the grid—from one-to-many to many-to-one and many-to-many.
This change requires coordination on an unprecedented scale, to ensure that electricity gets where it needs to be, when it needs to be there, and that the grid remains strong and stable. Policies addressing grid oversight also need a fresh look to ensure that new models of grid management are economically viable.
The behind-the-scenes labour and technology that goes into all this is creating a new paradigm in grid management: virtual power plants (VPPs). VPPs are digital interfaces that utilities can use to fine-tune how electricity moves between homes, businesses, power plants and other consumers and producers of energy.
Artificial intelligence and machine learning underpin VPPs, enabling energy providers to predict grid behavior and better match supply with demand.
Texas has an advantage here. Its largely deregulated market encourages experimentation, and a fiercely competitive retail electricity landscape promotes consumer engagement in energy decision-making.
Film 02
The power of communities
How benefits for one become benefits for all
By optimising consumption in clever ways, we don’t only generate value for the individual consumer, but we build a system that’s better optimised and cheaper to run… for everyone.
Chief marketing and flexibility officer, Kraken
Incentivising a collective approach
Making VPPs work requires changing the incentive structure for energy. In the old model, a consumer pays for energy generated by a utility power plant. In the new model, in exchange for greater control over their DERs, the utility may pay the consumer or provide other benefits.
For example, an EV driver may receive a discount on their electricity rates in exchange for forgoing decision-making authority over when and how much their EV charges when plugged in. This flexibility helps keep the grid balanced and secure.
In a prime example of VPPs in action, energy technology platform Kraken enabled a Texas utility to offer payouts to owners of smart thermostats, allowing the utility to control their heating and cooling during periods of peak demand. Kraken’s technology facilitated this exchange through the utility’s billing system.
It was a deal customers were happy to make, as long as they could stay comfortable indoors.
Independent research institute Centre for Net Zero monitored the response, finding that customers accepted 94% of the remote thermostat adjustments.5 As individuals see the benefits that networked energy systems bring to their lives, VPP adoption could surge.
Film 03
From consumer to prosumer
How are Texans rethinking home energy dynamics?
I can go home and I can fill my car and I can have the energy to transport myself wherever I need to, produced on site. That concept was so great. I'm my own filling station.
Customer, Houston
Texas is paving the VPP path
2050
The year Texas plans to achieve a net-zero economy6
If current trends hold, Texas communities will likely see continued growth of VPPs amid intensifying decarbonisation efforts—a victory on three fronts: increasing grid stability to prevent blackouts and brownouts, fighting climate change, and boosting climate resilience.
This will also set a template for others to follow. States will leverage the opportunities opened up by the Inflation Reduction Act, which offers generous tax incentives for clean energy, and recent changes to federal rules that mandate utilities plan for the long term regarding electricity transmission.
The complexities of America’s large and decentralised energy system continue to present hurdles to grid upgrades and decarbonisation. Short-term thinking still dominates in too many places and stakeholders may not grasp the benefits that taking risks could confer.
Still, as Texas leads the way, there are far more reasons for optimism. The innovative spirit and extensive resources of the second-largest state in the world’s largest economy will sustain its momentum toward progress.
References
- https://txev.org/texas-hits-over-250000-electric-vehicles-registered
- https://enerknol.com/texas-solar-generation-increased-by-35-percent
- https://www.eia.gov/state/analysis
- https://www.rechargenews.com/energy-transition/virtual-power-plants...
- https://www.centrefornetzero.org/papers/atmospheric-temperature-and-consumer-rejection-of-remote-thermostat-control
- https://cockrell.utexas.edu/news/archive/9473-report-texas...
